Q. I recently received my broker's license, but I do not plan to enter the real estate business at the present time. Must I open an escrow account even though I am not using my license?
A. No. An escrow or trust account, however, must be established prior to receipt of any trust funds in your capacity as a real estate broker.
Q. A service charge is levied by my bank when I fail to maintain a certain minimum balance in my escrow account, and the account is automatically closed when a zero balance occurs. May I deposit personal funds in my escrow account to avoid these penalties?
A. Yes. You may deposit a maximum of $100.00 of your personal funds in your escrow or trust account to avoid minimum balance service charges or to prevent cancellation of your account. Care should be taken, however, to properly enter and identify this deposit in your trust account records.
Q. I maintain only one bank account for my real estate business, but I write the words "trust account" on all earnest money checks, checks for rental payments, etc. Is this permissible?
A. No. The purpose of the trust account is to separate trust funds from the other funds of the broker. There must be a separate trust account in addition to a broker's regular business account.
Q. May trust funds be deposited in an interest bearing account?
A. Yes, if the principals authorize such deposits in writing and if the writing provides for the disbursement of the interest (G.S. 93A-6(a) (12)). Brokers are advised to be sure that each written agreement clearly states to whom the interest belongs and to whom it will be disbursed. It is the Board's belief that the vast majority of brokers do not and should not deposit their trust funds in an interest bearing account unless the deposits are for large amounts of money which will be held for extended periods of time.
Q. What monies should I as a real estate broker place in my escrow account?
A. All money received in a real estate transaction when acting as a real estate broker, escrow agent, or the temporary custodian of the funds of others (G.S. 93A-6(a) (12) ). For example, earnest money deposits, rental payments and damage deposits.
Q. When managing rental properties for others, must I deposit rental collections in an escrow or trust account?
A. Yes. All rents collected by a broker or salesman on behalf of his/her principal must be deposited in an escrow or trust account. The Board further recommends that a separate trust account designated by the bank as a "Rental Escrow Account" or "Rental Trust Account" be opened by brokers who are reasonably active in the areas of property management or leasing for others.
Q. Although I am a licensed real estate broker, I sometimes sell property which I personally own. Should I deposit into my trust account earnest money received from the sale of property which I personally own?
A. No. To do so would constitute "commingling" since you would be combining your own money with that of your principals, and such commingling could result in suspension or revocation of your real estate license.
Q. Is there a maximum time period within which trust funds must be deposited in my trust account?
A. Yes. "All monies received by a real estate broker acting in his fiduciary capacity shall be deposited in a trust or escrow account within 72 hours of receipt . . ." (North Carolina Real Estate Licensing Board Rule .0107(a) ) UNLESS some other provision is written into the purchase agreement.
Q. May I wait until an Offer to Purchase is accepted before depositing offeror's earnest money in my escrow account?
A. No. Money received by a real estate broker acting in his fiduciary capacity must be deposited in an escrow account within 72 hours of receipt (Rule .0107 Rules and Regulations). There are sound reasons behind a rule which requires the deposit of earnest money in an escrow account prior to acceptance of an offer. The earnest money accompanying an offer is usually paid with a check from the buyer. If a broker fails, within a reasonable time, to deposit the check and, consequently, the check is later returned unpaid, then the broker has not represented the best interests of his principal, the seller. Furthermore, earnest money is, by definition, an indication of good faith. The seller should be, told if the buyer's check is worthless in order to decide whether he wants to deal with such a person. The seller could authorize the broker to hold a check until acceptance of an offer, but such authority should be placed in writing for the broker's own protection.
Q, As a real estate broker, what should I do when a dispute arises between parties concerning trust funds?
A. You should KEEP THE MONEY IN YOUR TRUST ACCOUNT until the dispute is resolved to the satisfaction of all parties or until ordered by a court of competent jurisdiction to disburse the funds.
Q. As a broker, I realize that I must not disburse trust funds which are being claimed by different parties to the transaction. My question is simply, how can I determine if such a dispute exists?
A. If you are in doubt as to whether a dispute exists regarding the disposition of trust funds, the Board suggests that you notify all parties who have an interest in such funds advising them that you intend to disburse the funds on a given date unless an objection is filed with you prior to that date. The notice should be sent registered mail return receipt requested and should contain the date on which the funds will be disbursed (allow sufficient time for parties to respond), and the name(s) of the person(s) to whom the money will be disbursed. Should one of the parties object to your intended disbursement, you should inform the other party of the objection and declare to all parties that you will retain the funds in your trust account until disbursement is ordered by a court of competent jurisdiction or until the matter is satisfactorily settled by the parties.
Q. Must I retain trust records for a minimum period of time?
A. Yes. Brokers must retain trust records and earnest money receipts for a period of 3 years (North Carolina Real Estate Licensing Board Rule .0108), and such records must be made available to the Licensing Board or its authorized representative when the Board determines such records are pertinent to the conduct of an investigation of any specific complaint against a licensee (G.S. 93A-6(c) ).